Mandatory Binding Arbitration: is Sony playing with consumers’ rights?

Start here

In a very interesting article, GREG CRAGG discusses Sony’s last move. Sony changed its terms and conditions of use for the PlayStation Network (Sony’s online service for its PlayStation 3 and PlayStation Portable game consoles) last month to include mandatory binding arbitration and class action waivers. Mandatory binding arbitration requires that consumers submit to arbitration rather than file a lawsuit.

In CRAGG’s words, “Mandatory binding arbitration can be a viable alternative to litigation when the two parties are equal in power, but arbitrators strongly favor repeat business and rule in favor of large businesses the majority of the time. Similarly, class action lawsuits are one of the few effective tools that consumers have—or had—in holding corporations responsible for their wrongdoing. (…) Sony’s changes terms and conditions of use is particularly egregious, because these changes apply for existing customers and not just new customers. If existing customers wish to decline these new terms, they have to send a mailed letter to Sony (and include tracking to make sure that Sony cannot claim that the letter was lost in the mail). Failing to accept the terms, with or without a mailed declining letter, results in being banned from use of PSN, which includes most of the online functionality of the PlayStation 3 and PlayStation Portable. Sony knows that its customers have little choice but to accept these terrible terms. Sony echoes the words of Darth Vader: “I have altered the deal. Pray I do not alter it any further.” Here’s the full article: Sony Adds Mandatory Binding Arbitration and Class Action Waiver to PlayStation 3’s Terms of Service.

Mandatory binding arbitration is especially dangerous when consumers are involved. We should not forget that these kinds of clauses are standard terms, which generally consumers do not read (and therefore, do not know). In my opinion, this kind of attitude from Sony raises two different questions: consumers’ right to information (in standard terms) and the arguable bargaining power consumers have when facing mandatory binding arbitration clauses, which may be harmful for their interests.